LB Finance pre-tax profit up 106% to Rs. 419m in nine months

LB Finance has doubled profits and recorded a profit before tax of Rs. 419 million for the nine months ending December 31, 2008, a 106% increase from the corresponding period.

The company also posted a net interest income of Rs.844 million and a total revenue of Rs. 2.6 billion, an increase of 30% compared to last year.

Total assets of the Company rose from Rs.10.7 billion to Rs.14.4 billion due to expansion of lending activities of which 96 per cent are earning assets. Lending chiefly comprised lease and hire purchases of which Rs.9.4 billion was secured through Vehicle Leasing and Hire Purchase.

Real estate stock amounted to Rs.221 million at the end of the period. A notable expansion in its pawning operations increased Company pawning advances to an impressive Rs.1.9 billion as at December 31, 2008. Ninety eight per cent of all earning assets generated regular cash flows.

The Company’s gross NPL ratio which stood at 3.86% as at end-December 2007 improved to 3.39 per cent as at December 31, 2008, well below the industry ratio. The provision for bad debts for the period reduced to Rs.15 million, 85 per cent less than the Rs.104 million provision for the nine months ending December 31, 2007.

The Company’s shareholders equity was at Rs.1.2 billion as at December 31, 2008 while the core capital adequacy ratio was at 9.11%. Rs.450 million was successfully raised through the Company’s recently oversubscribed debenture issue, increasing its total capital adequacy ratio from 10.79 per cent to 13.26 per cent, which is well above the required minimum.

Managing Director of LB Finance Sumith Adhihetty said that the success of the concluded financial year could be attributed to a strategic and focused approach, as well as prudent financial principles. “We are a company that’s being around long enough to feel the changing winds of the industry before they even begin and are always ready to turn with it.”

Foreseeing the economic fluctuations caused by an international financial downturn, the company changed its business strategy, opting to focus on the micro-level operations and pawning services. Adhihetty said the financial figures reaped were therefore a result of always being a step ahead of the ever-changing economy.

The Company also focused on high-growth areas such as its loan base, especially lease financing for three-wheelers. Special attention to pawning operations saw LB Finance expanding its services further across the island, through 35 pawning centres, 18 branches and the head office.